On 6 September, the Reserve Bank of Australia (RBA) issued a 50 bps rate hike. However, economists at HSBC expect the AUD to weaken against the “safe-haven” USD in the current risk-off environment.

Aussie faces weakening pressure

“It is far too early for the RBA to judge the full economic impact of the rate hikes (225 bps in just 126 days), although the cooling housing market and rising interest burden are expected to start to weigh on consumer spending in the coming months.”

“As the cash rate is now near the RBA's estimated neutral rate and given this outlook, we expect the RBA to slow the pace of its hiking soon.”

“The AUD has not been very responsive to rate announcements by the RBA over the past year instead it has been more sensitive to the change in market-wide risk appetite. With that in mind, we expect the AUD/USD pair to face downward pressures in the near term, on the back of receding risk-on momentum.”